Bond Project Journal Entries and Other Questions

Answer questions 29 and 30.

KING UNIVERSITY BOND CASE
Fall 2023
Intermediate Accounting II – 312-61
Instructor: Tom Garbe
KING UNIVERSITY BOND OFFERING
Objectives
Utilize the student’s knowledge of accounting for bond transactions and apply it to an actual
bond offering.
Information Needed
Updated Official Statement Dated November 17, 2022 — King County Higher Education Building
Authority: $15,140,000 University Revenue Bonds, Series A of 2022 (University) – (referred to
as the “2022 Bonds”)
King University Financial Statements for the year ended June 30, 2022
Requirements:
1. Working in teams, prepare answers to the following questions based on information
provided in the Updated Official Statement, the King University financial statements and
notes, additional information from class lectures and discussion, and independent
research.
2. The Updated Official Statement includes a significant amount of information. You should
read the document through at least page 26 as those pages contain specific information
about the bond offering. You also may need to read the appendices for certain
information within them in answering some of the questions.
3. The Updated Official Statement, the Original Official Statement dated December 2,
2021, and King University Financial Statements for the year ended June 30, 2022 are
available in the Bonds Case Folder on Canvas.
All submissions should be prepared using the Microsoft Word file included in the Bonds Case
Module in Canvas. You can adjust the spacing to include your responses to the questions.
While there is specific guidance as to the information required to answer each question,
be sure you answer the questions completely. The final completed Word document should
also include a cover page including team members’ names and the following signed attestation
as to compliance with the School of Business Code of Ethical Conduct:
“In accordance with the School of Business Code of Ethical Behavior, I attest that I have
not engaged in any acts of plagiarism in completing this assignment.”
The completed Word document should be submitted via Canvas. For question #28, you
should prepare the amortization schedules using Excel (using template provided) and
submit the workbook separately from the Word document via Assignments in Canvas.
Due Date: Friday, November 3, 2023 – 6:00 PM submission via Canvas
1
Questions – adjust spacing as needed
1. What is the Allegheny County Higher Education Building Authority? Describe its role in
the issuance of the 2022 Bonds.
2.
While the 2022 Bonds are issued by the Authority, what risks does the Authority retain
subsequent to the issuance?
3. What do you believe are the advantages of issuing bonds using the Authority rather than
directly by the University?
2
4. The 2022 Bonds were sold pursuant to a Forward Delivery Bond Purchase Agreement.
Describe what this means and how it relates to the 2021 Bonds issued in December
2021.
5. What is the total face/par value of the 2022 Bonds issued? What were the total proceeds
of the sale of the 2022 Bonds?
6. Were the 2022 Bonds sold to investors at a discount or a premium? How do you know
this? What would be the reason the bonds were sold above or below par value?
7. What is the minimum bond dollar amount that can be purchased by an individual
investor?
3
8. Are the bonds “rated” by any of the major rating agencies and if yes, which ones and
what is their rating?
9. What does the rating assigned by the rating agency mean? In other words, what did the
rating agency conclude about the University’s “creditworthiness?” (Hint: you will need to
research the rating scale used by the applicable rating agencies).
4
10. Briefly discuss at least three “risk factors” related to an investment in the 2022 Bonds.
11. What is the purpose of the Loan and Security Agreement dated as of December 1, 2022
between the Authority and King University?
5
12. Who were the bond counsels for issuance of the bonds? What parties do they represent,
respectively, and what are their roles?
13. Who were the underwriters for the bonds? In this transaction, what did the underwriters
do? How much compensation did the underwriters receive for their services (Hint:
Underwriting discount)
14. Are these bonds secured or unsecured bonds? If the bonds are secured, explain the
nature of the collateral offered by the University?
15. What will the net proceeds from the issuance of the 2022 Bonds be used for?
6
16. Explain the “Rate Covenant” included in the Official Statement.
17. What were the total costs of issuing the bonds? What did these costs include? How
should these costs be accounted for by King under GAAP?
18. Who was the financial advisor to King in connection with the issuance of the bonds?
What was their role in the transaction?
19. How often is interest on the bonds be paid to the bondholders? How is interest on the
bonds computed?
7
20. Is the interest received by the bondholders on the 2022 Bonds subject to federal or state
income taxes? If not, why not?
21. How and when are the bonds to be repaid? In other words, is there be periodic principal
payments to the bondholders, or are the bondholders to be repaid in a lump sum at the
maturity date?
22. Can any of the 2022 Bonds be redeemed prior to their maturity date? If so, when and
what is the redemption price?
23. Utilizing the University’s June 30, 2022 financial statements, what was the amount of the
University’s long-term debt at that date?
8
24. What is the name of the independent certified public accounting firm that serves as the
auditors of the University’s financial statements?
25. What was the University’s total operating revenue for the years ended June 30, 2022
and 2021, respectively?
26. What was King total interest expense reported for the years ended June 30, 2022 and
2021, respectively?
27. Using the yield function in Excel, calculate the yield to the maturity date for each of the
following 2022 Bonds. Assume the settlement date for the 2022 Bonds was
December 1, 2022. The yields should be carried out to 6 decimal places.
Maturity Date
Principal
Interest
Rate
Price
Proceeds
Yield at
Pricing
March 1, 2033
March 1, 2034
$1,220,000
$1,285,000
5.000% 125.947
5.000% 125.545
$1,536,553
$1,613,253
2.050%
2.090%
Yield to Maturity
Date
28. Assuming the University uses the effective interest method, prepare amortization
schedules for each of the 2022 Bonds. For the 2022 Bonds that mature on March 1,
2033 and March 1, 2034, the premium/discount amortization on the bonds should be
calculated to the maturity date and not the first optional redemption date.
For purposes of your amortization schedules, assume the bonds were issued on
December 1, 2022. Prepare these schedules using the Excel template posted on Canvas
with a worksheet for each of the 2022 Bond issues. This Excel file should be submitted as
a separate document from the completed Word document. Note: These schedules will
be extremely helpful in answering the remaining questions.
9
29. Prepare the following journal entries:
a. Initial issuance of the 2022 Bonds (you can use one entry for all the 2022 Bonds)
Entry on December 1, 2022
Debit
Credit
b. Prepare the journal entries to accrue the interest expense on December 31, 2022 and
any related premium/discount amortization for the 2022 Bonds series that mature on
March 1, 2027, March 1, 2029, March 1, 2031 and March 1, 2033. You should have
separate entries for each series per the example below.
Entry on December 31, 2022
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2027
Debit
Credit
Entry on December 31, 2022
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2029
Debit
Credit
Entry on December 31, 2022
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2031
Debit
Credit
Entry on December 31, 2022
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2033
Debit
Credit
10
c. Prepare the journal entries to record the first payment of interest on March 1, 2023 and
any related entries for the 2022 Bonds series that mature on March 1, 2027, March 1,
2029, March 1, 2031 and March 1, 2033.
Entry on March 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2027
Debit
Credit
Entry on March 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2029
Debit
Credit
Entry on March 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2031
Debit
Credit
Entry on March 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2033
Debit
Credit
11
d. Prepare the journal entries to accrue the interest expense on June 30, 2023 (the end of
King’s (fiscal year) and any related premium/discount amortization for the 2022 Bonds
series that mature on March 1, 2027, March 1, 2029, March 1, 2031 and March 1, 2033
Entry on June 30, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2027
Debit
Credit
Entry on June 30, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2029
Debit
Credit
Entry on June 30, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2031
Debit
Credit
Entry on June 30, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2033
Debit
Credit
12
e. Prepare the journal entries to record the second payment of interest on
September 1, 2023 and any related entries for the 2022 Bonds series that mature on
March 1, 2027, March 1, 2029, March 1, 2031 and March 1, 2033.
Entry on September 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2027
Debit
Credit
Entry on September 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2029
Debit
Credit
Entry on September 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2031
Debit
Credit
Entry on September 1, 2023
Accrued Interest Payable
Interest Expense
Premium on Bonds Payable
Cash
2022 Bonds Maturing March 1, 2033
Debit
Credit
13
f.
Prepare the journal entries to accrue the interest expense on December 31, 2023 and
any related premium/discount amortization for the 2022 Bonds series that mature on
March 1, 2027, March 1, 2029, March 1, 2031 and March 1, 2033.
Entry on December 31, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2027
Debit
Credit
Entry on December 31, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2029
Debit
Credit
Entry on December 31, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2031
Debit
Credit
Entry on December 31, 2023
Interest expense
Premium on Bonds Payable
Accrued Interest Payable
2022 Bonds Maturing March 1, 2033
Debit
Credit
14
30. Based on your amortization schedule and your journal entries, determine the following:
a. Total interest expense on the 2022 Bonds series that mature on March 1, 2027, March
1, 2029, March 1, 2031 and March 1, 2033 for the fiscal year ended June 30, 2023.
b. Total interest paid on the 2022 Bonds series that mature on March 1, 2027, March 1,
2029, March 1, 2031 and March 1, 2033 for the fiscal year ended June 30, 2023
c. What is the carrying value of the 2022 Bonds series that mature on March 1, 2027 at
June 30, 2023?
d. What is the carrying value of the 2022 Bonds series that mature on March 1, 2029 at
June 30, 2023?
e. What is the carrying value of the 2022 Bonds series that mature on March 1, 2031 at
June 30, 2023?
f.
What is the carrying value of the 2022 Bonds series that mature on March 1, 2033 at
June 30, 2023?
15
UPDATED OFFICIAL STATEMENT DATED NOVEMBER 17, 2022 AND UPDATES
THE OFFICIAL STATEMENT DECEMBER 2, 2021
New Issue—Book Entry Only
Ratings: Moody’s “A2”
S&P “A”
(See “RATINGS” herein)
In the opinion of Bond Counsel, under existing statutes, regulations, rulings and court decisions, interest on the Bonds will
not be includible in gross income of the holders thereof for federal income tax purposes, assuming continuing compliance by
the Authority and the University with the requirements of the Code. Interest on the Bonds will not be a specific preference
item for purposes of computing the federal alternative minimum tax on individuals. Bond Counsel is also of the opinion that
under existing law, interest on the Bonds is exempt from Pennsylvania personal income tax and from Pennsylvania corporate
net income tax. For a discussion of other federal tax consequences arising with respect to the Bonds, see “TAX MATTERS.”
ALLEGHENY COUNTY HIGHER EDUCATION BUILDING AUTHORITY
$15,140,000
University Revenue Bonds
Series A of 2022
(Duquesne University) (Forward Delivery)
Dated: Date of Delivery
Due: See Inside Cover
The Allegheny County Higher Education Building Authority University Revenue Bonds, Series A of 2022 (Duquesne University)
(Forward Delivery) (the “Bonds”) are limited obligations of the Allegheny County Higher Education Building Authority (the
“Authority”), payable solely from and secured by, and only by, the Trust Estate (as defined hereinafter) pledged by the Authority
to secure the Bonds pursuant to a Trust Indenture dated as of December 1, 2022 (the “Indenture”) between the Authority and
The Bank of New York Mellon Trust Company, N.A., Pittsburgh, Pennsylvania, as trustee (the “Trustee”), which Trust Estate
includes payments received by the Authority pursuant to the Loan Agreement (as defined below) and other funds pledged under
the Indenture.
The Bonds will mature on the dates and in the aggregate principal amounts set forth on the inside cover hereof. Interest on the
Bonds is payable on March 1 and September 1 of each year, commencing March 1, 2023, until maturity or earlier redemption by
the Trustee. The Bonds are issuable only in fully registered form without coupons and, when issued, will be registered in the
name of Cede & Co., as nominee of The Depository Trust Company, New York, New York (“DTC”). So long as Cede & Co. is the
registered owner, reference herein to the registered owners of the Bonds shall mean Cede & Co. and not the Beneficial Owners (as
defined herein). DTC will act as securities depository of the Bonds, and purchases of beneficial ownership interest in the Bonds
will be made in book-entry form only, in denominations of $5,000 or integral multiples thereof. Beneficial Owners will not receive
certificates representing their interest in the Bonds. See “THE BONDS – Description of the Bonds” and “DTC AND BOOK-ENTRY.”
Pursuant to a Loan and Security Agreement dated as of December 1, 2022 (the “Loan Agreement”) between the Authority and
Duquesne University of the Holy Spirit, a Pennsylvania nonprofit corporation (the “University”), the Authority will loan the
proceeds derived from the sale of the Bonds to the University to be applied for the purposes described herein. The University is
required under the terms of the Loan Agreement to make payments to the Trustee for the account of the Authority in amounts and
at times sufficient to pay the principal of, premium (if any) on and interest on the Bonds. The University’s obligation to make the
payments required by the Loan Agreement is a general obligation of the University that is not limited to any particular source of
funds or revenues. See “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS” and “APPENDIX D – Summary of the
Indenture and Loan Agreement.”
THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE PAYABLE SOLELY FROM AND SECURED SOLELY
BY FUNDS HELD BY THE TRUSTEE PURSUANT TO THE INDENTURE AND MONEYS AND REVENUES PAYABLE UNDER
THE LOAN AGREEMENT. THE BONDS AND THE INTEREST THEREON WILL NEVER CONSTITUTE AN INDEBTEDNESS OF
THE AUTHORITY WITHIN THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND WILL
NEVER CONSTITUTE OR GIVE RISE TO PECUNIARY LIABILITY OF THE AUTHORITY, NOR WILL ANY BOND OR INTEREST
THEREON BE A CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY OR THE GENERAL CREDIT AND TAXING
POWER OF THE COMMONWEALTH OF PENNSYLVANIA, THE COUNTY OF ALLEGHENY OR ANY POLITICAL SUBDIVISION
THEREOF. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF THE COMMONWEALTH OF PENNSYLVANIA,
THE COUNTY OF ALLEGHENY OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO THE PAYMENT OF THE
PRINCIPAL OF, PREMIUM, IF ANY, ON OR INTEREST ON THE BONDS, OR OTHER COSTS INCIDENTAL THERETO. THE
AUTHORITY HAS NO TAXING POWER.
This cover page contains limited information for quick reference only. It is not a summary of this issue. Investors must read the
entire Updated Official Statement to obtain information essential to making an informed investment decision.
The Bonds are offered when, as and if issued by the Authority and received by the Underwriters, subject to prior sale, or to
withdrawal or modification of the offer without notice, and subject to the approving opinion of Eckert Seamans Cherin &
Mellott, LLC, Bond Counsel. Certain legal matters will be passed upon for the University by Pamela W. Connelly, Esquire,
Senior Vice President for Legal Affairs and General Counsel of the University, for the Authority by Clark Hill PLC, Pittsburgh,
Pennsylvania, counsel to the Authority, and for the Underwriters by Dinsmore & Shohl LLP, Pittsburgh, Pennsylvania, counsel
to the Underwriters. The Bonds are expected to be delivered on or about December 1, 2022.
Wells Fargo Securities
Dated: November 17, 2022
BofA Securities
$15,140,000
Allegheny County Higher Education Building Authority
University Revenue Bonds, Series A of 2022
(Duquesne University) (Forward Delivery)
Maturity Date
(March 1)
Principal
Amount
Interest
Rate
Yield
Price
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
$1,500,000
1,580,000
1,660,000
1,740,000
1,825,000
1,005,000
1,055,000
1,105,000
1,165,000
1,220,000
1,285,000
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
1.020%
1.140
1.320
1.470
1.670
1.780
1.880
1.940
2.000
2.050
2.090
104.929%
108.548
111.667
114.489
116.668
118.963
121.051
123.221
125.216
125.947C
125.545 C
CUSIP No. **
(01728R)
NY1
NZ8
PA1
PB9
PC7
PD5
PE3
PF0
PG8
PH6
PJ2
C = Priced to the first optional redemption date of September 1, 2032.
The above CUSIP (Committee on Uniform Securities Identification Procedures) numbers have been assigned by an organization not affiliated
with the Authority, the University or the Underwriters, and such parties are not responsible for the selection or use of the CUSIP numbers. The
CUSIP numbers are included solely for the convenience of bondholders and no representation is made as to the correctness of such CUSIP numbers.
CUSIP numbers assigned to securities may be changed during the term of such securities based on a number of factors including, but not limited
to, the refunding or defeasance of such issue or the use of secondary market financial products. None of the Authority, the University or the
Underwriters have agreed to, and there is no duty or obligation to, update this Updated Official Statement to reflect any change or correction in the
CUSIP numbers set forth above.
**
ALLEGHENY COUNTY HIGHER EDUCATION BUILDING AUTHORITY
436 Seventh Avenue, Suite 500
Pittsburgh, Pennsylvania 15219
BOARD MEMBERS OF THE AUTHORITY
Margaret McCormick Barron
Chairman
Councilman DeWitt Walton
Vice Chairman
Senator Wayne Fontana
Secretary and Treasurer
John Brown, Jr.
Member
Daniel C. Connolly
Member
Stanley Louis Gorski
Member
Marian M. Lien
Member
Jason Markovich
Member
Stephanie Lynn Turman
Member
AUTHORITY COUNSEL
Clark Hill PLC
Pittsburgh, Pennsylvania
THE UNIVERSITY
Duquesne University of the Holy Spirit
Pittsburgh, Pennsylvania
TRUSTEE
The Bank of New York Mellon Trust Company, N.A.
Pittsburgh, Pennsylvania
FINANCIAL ADVISOR
Stifel, Nicolaus & Company, Incorporated
Pittsburgh, Pennsylvania
BOND COUNSEL
Eckert Seamans Cherin & Mellott, LLC
Pittsburgh, Pennsylvania
UNDERWRITERS’ COUNSEL
Dinsmore & Shohl LLP
Pittsburgh, Pennsylvania
The information set forth herein has been obtained from the Allegheny County Higher Education Building Authority
(the “Authority”) as to information concerning the Authority, and from Duquesne University of the Holy Spirit (the
“University”) and other sources which are believed to be reliable, but the information provided by sources other than
the Authority is not guaranteed as to accuracy or completeness by the Authority. The information and expressions of
opinions herein are subject to change without notice and neither the delivery of this Updated Official Statement nor
any sale made hereunder shall, under any circumstances, create any implication that there has been no change in any
of the information set forth herein since the date hereof.
The Underwriters have provided the following sentence for inclusion in this Updated Official Statement. The
Underwriters have reviewed the information in this Updated Official Statement in accordance with, and as part of, its
responsibilities to investors under the federal securities law as applied to the facts and circumstances of this
transaction, but the Underwriters do not guarantee the accuracy or completeness of such information.
No dealer, broker, salesperson or other person has been authorized by the Authority, the Underwriters or the University
to give any information or to make any representations with respect to the Bonds other than those contained in this
Updated Official Statement, and if given or made, such other information or representations must not be relied upon
as having been authorized by any of the foregoing. This Updated Official Statement does not constitute an offer to
sell or the solicitation of any offer to buy any of the Bonds in any jurisdiction in which it is unlawful to make such an
offer, solicitation, or sale.
The Bonds are not and will not be registered under the Securities Act of 1933, or under any state securities laws, and
the Indenture has not been and will not be qualified under the Trust Indenture Act of 1939, as amended, because of
available exemptions therefrom. Neither the Securities and Exchange Commission nor any federal, state, municipal,
or other governmental agency will pass upon the accuracy, completeness, or adequacy of this Updated Official
Statement.
For purposes of compliance with Rule 15c2-12 of the United States Securities and Exchange Commission, as
amended, and in effect on the date hereof, this Updated Official Statement constitutes an official statement of the
Authority that has been deemed final by the Authority as of its date.
References to website addresses presented herein are for informational purposes only and may be in the form
of a hyperlink solely for the reader’s convenience. Unless specified otherwise, such websites and the information
or links contained therein are not incorporated into, and are not part of, this Updated Official Statement.
THE ORDER AND PLACEMENT OF MATERIALS IN THIS UPDATED OFFICIAL STATEMENT,
INCLUDING THE APPENDICES, ARE NOT TO BE DEEMED TO BE A DETERMINATION OF
RELEVANCE, MATERIALITY, OR IMPORTANCE, AND THIS UPDATED OFFICIAL STATEMENT,
INCLUDING THE APPENDICES, MUST BE CONSIDERED IN ITS ENTIRETY. THE OFFERING OF
THE BONDS IS MADE ONLY BY MEANS OF THIS ENTIRE UPDATED OFFICIAL STATEMENT.
TABLE OF CONTENTS
INTRODUCTION ………………………………………………………………………………………………………………………………………1
General ……………………………………………………………………………………………………………………………………………………..1
Purpose of the Bonds …………………………………………………………………………………………………………………………………..1
Contemporaneous Financing ………………………………………………………………………………………………………………………..1
Description of the Bonds ……………………………………………………………………………………………………………………………..2
Security and Sources of Payment for the Bonds………………………………………………………………………………………………2
Tax Exemption …………………………………………………………………………………………………………………………………………..3
Trustee and Bond Registrar ………………………………………………………………………………………………………………………….4
Legal Authority ………………………………………………………………………………………………………………………………………….4
Offering and Delivery of the Bonds ………………………………………………………………………………………………………………4
Continuing Disclosure …………………………………………………………………………………………………………………………………4
Other Information ……………………………………………………………………………………………………………………………………….4
THE UNIVERSITY ……………………………………………………………………………………………………………………………………4
THE AUTHORITY …………………………………………………………………………………………………………………………………….5
THE BONDS ……………………………………………………………………………………………………………………………………………..5
Description of the Bonds ……………………………………………………………………………………………………………………………..5
Delivery of Certificates; Registered Owners …………………………………………………………………………………………………..7
Transfer and Exchange ………………………………………………………………………………………………………………………………..7
Redemption of the Bonds …………………………………………………………………………………………………………………………….7
SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS ……………………………………………………………..8
General ……………………………………………………………………………………………………………………………………………………..8
Pledge of Loan Agreement …………………………………………………………………………………………………………………………..8
Covenant Regarding Pledge of Tuition and Student Fees …………………………………………………………………………………9
Covenants Regarding Mortgage Liens …………………………………………………………………………………………………………..9
Rate Covenant; Incurrence of Additional Indebtedness ……………………………………………………………………………………9
Limited Obligations …………………………………………………………………………………………………………………………………….9
PLAN OF FINANCE ……………………………………………………………………………………………………………………………….. 10
Estimated Sources and Uses of Funds …………………………………………………………………………………………………………. 10
Uses of Bond Proceeds ……………………………………………………………………………………………………………………………… 10
DTC AND BOOK-ENTRY ……………………………………………………………………………………………………………………….. 10
BONDHOLDERS’ RISKS ………………………………………………………………………………………………………………………… 12
CERTAIN FORWARD DELIVERY CONSIDERATIONS …………………………………………………………………………… 17
Bond Purchase Agreement; Signing and Preliminary Closing ………………………………………………………………………… 18
Closing Date and Closing ………………………………………………………………………………………………………………………….. 18
Conditions to Closing ……………………………………………………………………………………………………………………………….. 18
Additional Risks Related to the Delayed Delivery Period ………………………………………………………………………………. 21
LEGAL MATTERS …………………………………………………………………………………………………………………………………. 22
Absence of Material Litigation …………………………………………………………………………………………………………………… 22
Enforceability of Remedies ……………………………………………………………………………………………………………………….. 22
TAX MATTERS ……………………………………………………………………………………………………………………………………… 23
Federal Tax Matters ………………………………………………………………………………………………………………………………….. 23
Pennsylvania ……………………………………………………………………………………………………………………………………………. 24
Other ………………………………………………………………………………………………………………………………………………………. 24
APPROVAL OF LEGALITY ……………………………………………………………………………………………………………………. 24
FINANCIAL ADVISOR …………………………………………………………………………………………………………………………… 24
THE TRUSTEE ……………………………………………………………………………………………………………………………………….. 24
CERTAIN RELATIONSHIPS …………………………………………………………………………………………………………………… 24
CONTINUING DISCLOSURE………………………………………………………………………………………………………………….. 25
UNDERWRITING …………………………………………………………………………………………………………………………………… 25
RATINGS ……………………………………………………………………………………………………………………………………………….. 26
MISCELLANEOUS …………………………………………………………………………………………………………………………………. 26
Independent Certified Public Accountants …………………………………………………………………………………………………… 26
Additional Information ……………………………………………………………………………………………………………………………… 26
APPENDIX A – DESCRIPTION OF DUQUESNE UNIVERSITY OF THE HOLY SPIRIT
APPENDIX B – AUDITED FINANCIAL STATEMENTS OF DUQUESNE UNIVERSITY OF THE HOLY SPIRIT AS
OF AND FOR THE YEARS ENDED JUNE 30, 2022 AND 2021
APPENDIX C – FORM OF OPINION OF BOND COUNSEL
APPENDIX D – SUMMARY OF THE INDENTURE AND LOAN AGREEMENT
APPENDIX E – SUMMARY OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIX F – FORM OF DELAYED DELIVERY CONTRACT
ALLEGHENY COUNTY HIGHER EDUCATION BUILDING AUTHORITY
$15,140,000
University Revenue Bonds, Series A of 2022
(Duquesne University) (Forward Delivery)
INTRODUCTION
General
This Updated Official Statement, including the cover page and appendices, sets forth certain information concerning
the Allegheny County Higher Education Building Authority (the “Authority”), Duquesne University of the Holy Spirit
(the “University”) and the Authority’s University Revenue Bonds, Series A of 2022 (Duquesne University) (Forward
Delivery) (the “Bonds”). The Authority is a body corporate and politic created pursuant to a resolution of the Board
of County Commissioners of the County of Allegheny, Pennsylvania (the “County”) under the Act of the General
Assembly of the Commonwealth of Pennsylvania (the “Commonwealth”) approved June 19, 2001, P.L. 287, No. 22
(53 Pa. C.S. Ch. 56), known as the Municipality Authorities Act, as amended and supplemented (the “Act”). See “THE
AUTHORITY” herein for certain information about the Authority.
This Introduction is not a summary of this Updated Official Statement and is intended only for quick reference. It
is only a brief description of and guide to, and is qualified in its entirety by reference to, more complete and detailed
information contained in the entire Updated Official Statement, including the cover page and the Appendices, and
the documents summarized or described herein. Investors should fully review the entire Updated Official
Statement. The offering of the Bonds to potential investors is made only by means of the entire Updated Official
Statement, including the Appendices hereto. No person is authorized to detach this Introduction from the Updated
Official Statement or otherwise to use it without the entire Updated Official Statement.
Purpose of the Bonds
The proceeds of the sale of the Bonds will be loaned to the University for a project (the “Project”) consisting of
financing all or a portion of the costs of: (a) currently refunding all of the outstanding Allegheny County Higher
Education Building Authority University Revenue Bonds, Series A of 2013 (Duquesne University) (the “2013A
Bonds”) and (b) issuance of the Bonds. See “PLAN OF FINANCE.”
Contemporaneous Financing
The offer and sale of the Bonds occurred at substantially the same time as another publicly offered series of bonds
being issued for the benefit of the University, the Allegheny County Higher Education Building Authority University
Revenue Bonds, Series A of 2021 (Duquesne University), issued by the Authority on December 9, 2021 in the
aggregate principal amount of $47,890,000 (the “2021A Bonds”). The 2021A Bonds were issued to pay all or a portion
of the costs of (i) constructing, equipping and furnishing the University’s College of Medicine facility, related capital
expenditures to such facility and other University facilities, and other miscellaneous capital expenditures, (ii) currently
refunding all of the Authority’s University Revenue Bonds, Series A of 2011 (Duquesne University), and (iii) paying
costs of issuance of the 2021A Bonds. The 2021A Bonds are not being offered by this Updated Official Statement,
which relates only to the Bonds.
Forward Delivery Bond Purchase Agreement
The Bonds are being sold pursuant to a Forward Delivery Bond Purchase Agreement dated December 2,
2021 (the “Bond Purchase Agreement”) among the Authority, the University and Wells Fargo Bank, National
Association (the “Representative”), acting for itself and BofA Securities, Inc. (collectively, the “Underwriters”), and
will be delivered on or about December 1, 2022, subject to the approval of validity and certain other matters by Bond
Counsel and the satisfaction of certain other conditions set forth in the Bond Purchase Agreement. See “CERTAIN
FORWARD DELIVERY CONSIDERATIONS” herein.
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An investment in the Bonds involves certain additional risks due to the delayed delivery of the Bonds.
The delivery of the Bonds is subject to satisfaction of certain conditions precedent. For a discussion of certain
factors that should be considered by prospective investors in evaluating an investment in the Bonds, see
“CERTAIN FORWARD DELIVERY CONSIDERATIONS” herein. The Underwriters will require
prospective purchasers of the Bonds to execute and deliver a Delayed Delivery Contract in substantially the
form included as APPENDIX F hereto (the “Delayed Delivery Contract”). Each prospective purchaser of the
Bonds should make an independent evaluation of all of the information presented in this Updated Official
Statement, including the information under the caption “CERTAIN FORWARD DELIVERY
CONSIDERATIONS.”
Description of the Bonds
Redemption. The Bonds are subject to redemption prior to stated maturity. See “THE BONDS – Redemption of the
Bonds.”
Denominations. The authorized denominations of the Bonds will be $5,000 and any integral multiple thereof (an
“Authorized Denomination”). See “THE BONDS – Description of the Bonds.”
Registration; Registration of Transfer and Exchange. Ownership of the Bonds shall be registered on the registration
books of the Authority maintained by the Trustee (as hereinafter defined). The Bonds will initially be issued only as
book-entry securities. The Depository Trust Company (“DTC”), New York, New York, will act as securities
depository for the Bonds. Ownership of the Bonds may be registered, transferred and exchanged in the manner
described under “THE BONDS – Description of the Bonds” and “DTC AND BOOK-ENTRY.”
For a more complete description of the Bonds and the basic documentation pursuant to which they are being issued,
see “THE BONDS” and “APPENDIX D – Summary of the Indenture and Loan Agreement.”
Security and Sources of Payment for the Bonds
The Bonds are being issued pursuant to a Trust Indenture dated as of December 1, 2022 (the “Indenture”) between
the Authority and The Bank of New York Mellon Trust Company, N.A., Pittsburgh, Pennsylvania, as trustee (the
“Trustee”). Pursuant to the Indenture, the Authority will assign and pledge to the Trustee as security for the Bonds
the Trust Estate (as defined in the Indenture and in APPENDIX D to this Updated Official Statement), which includes
all of the Authority’s right, title and interest in and to the Loan Agreement (as defined below) and the payments due
thereunder, excluding certain rights to payment of expenses and indemnification, together with all moneys and
securities from time to time held by the Trustee under the terms of the Indenture (other than the Rebate Fund) and all
income and receipts thereon, subject to the provisions of the Indenture permitting the application of such amounts for
the purposes and on the terms and conditions set forth in the Indenture. See “SECURITY FOR AND SOURCES OF
PAYMENT OF THE BONDS” and “APPENDIX D – Summary of the Indenture and Loan Agreement.”
Pursuant to a Loan and Security Agreement dated as of December 1, 2022 (the “Loan Agreement”) between the
Authority and the University, the Authority will loan the proceeds derived from the sale of the Bonds to the University
to be applied for the purposes described above. The University is required under the terms of the Loan Agreement to
make payments to the Trustee for the account of the Authority in amounts and at times sufficient to pay the principal
of, redemption premium (if any), and interest on the Bonds. The University’s obligation to make the payments
required by the Loan Agreement is a general obligation of the University that is not limited to any particular source
of funds or revenues. See “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS” and “APPENDIX
D – Summary of the Indenture and Loan Agreement.”
The following bonds issued on behalf of the University (together, the “Other Outstanding Bonds”) were outstanding
as of November 2022 in the respective principal amounts shown below:
(i)
The 2013A Bonds, outstanding in the amount of $18,865,000;
(ii)
The Allegheny County Higher Education Building Authority University Revenue
Refunding Bonds, Series A of 2014 (Duquesne University), outstanding in the amount of $19,025,000;
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(iii)
The Allegheny County Higher Education Building Authority University Revenue
Refunding Bonds, Series of 2016 (Duquesne University), outstanding in the amount of $54,230,000;
(iv)
The Allegheny County Higher Education Building Authority University Revenue
Refunding Bonds, Series of 2018 (Duquesne University), outstanding in the amount of $17,760,000;
(v)
The Pennsylvania Higher Educational Facilities Authority University Revenue Bonds,
Series A of 2019 (Duquesne University), outstanding in the amount of $18,690,000;
(vi)
The Pennsylvania Higher Educational Facilities Authority University Revenue Bonds,
Series B of 2019 (Duquesne University) (Federally Taxable), outstanding in the amount of $10,000,000;
(vii)
The Allegheny County Higher Education Building Authority University Revenue Bonds,
Series A of 2020 (Duquesne University), outstanding in the amount of $8,945,000;
(viii)
The Allegheny County Higher Education Building Authority University Revenue Bonds,
Series B of 2020 (Duquesne University) (Federally Taxable), outstanding in the amount of $15,835,000; and
(ix)
The 2021A Bonds, outstanding in the amount of $45,075,000.
The University anticipates that a portion of the proceeds of the Bonds will be used for the purpose of refunding all of
the outstanding 2013A Bonds. See “APPENDIX D – Summary of the Indenture and Loan Agreement.”
The Bonds are not secured by a lien on any property of the University or a mortgage on any real property of the
University. However, the University has entered into separate covenants, for the benefit of the holders of the Other
Outstanding Bonds and the Bonds, that it will not grant a lien on any property to secure any Long-Term Debt unless
a lien of equal or superior rank and priority is granted in favor of the trustee for the applicable series of bonds for the
benefit of the holders of such bonds. Currently, no Long-Term Debt of the University is secured by any lien on
property of the University or any mortgage on real property of the University.
The Bonds are limited obligations of the Authority. Neither the general credit of the Authority nor the credit
or the taxing power of the County, the Commonwealth or any political subdivision thereof is pledged for the
payment of the principal of, premium, if any, or interest on the Bonds, nor shall the Bonds be or be deemed to
be general obligations of the Authority or obligations of the County, the Commonwealth or any political
subdivision thereof, nor shall the County, the Commonwealth or any political subdivision thereof be liable for
the payment of the principal of, premium, if any, or interest on the Bonds. The Authority has no taxing power.
See “SECURITY AND SOURCES OF PAYMENT FOR THE BONDS” herein.
Tax Exemption
In the opinion of Bond Counsel, interest on the Bonds is excluded from gross income for federal income tax purposes.
Furthermore, interest on the Bonds is not an item of tax preference for purposes of the federal alternative minimum
tax imposed on individuals.
Bond Counsel is also of the opinion that under existing law, interest on the Bonds is exempt from Pennsylvania
personal income tax and from Pennsylvania corporate net income tax. See “APPENDIX C — Form of Opinion of
Bond Counsel” for the form of opinion Bond Counsel propose to deliver in connection with the issuance of the Bonds.
For a more complete discussion of such opinions and certain tax consequences incident to the ownership of the Bonds,
see “TAX MATTERS.”
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Trustee and Bond Registrar
The Bank of New York Mellon Trust Company, N.A., Pittsburgh, Pennsylvania, will act as Trustee and Bond Registrar
for the Bonds. The designated corporate trust office of the Trustee (the “Designated Office”) is 500 Ross Street, 12th
Floor, Pittsburgh, Pennsylvania 15262.
Legal Authority
The Bonds are being issued and secured pursuant to the Act. The Bonds have been authorized pursuant to a resolution
of the Authority adopted on October 28, 2021 (the “Bond Resolution”). The Loan Agreement will be executed and
delivered in accordance with the Act, the Bond Resolution and resolutions adopted by the Board of Directors of the
University.
Offering and Delivery of the Bonds
The Bonds are offered subject to prior sale when, as and if issued by the Authority and accepted by the Underwriters,
subject to the approval of legality by Eckert Seamans Cherin & Mellott, LLC, Pittsburgh, Pennsylvania, Bond Counsel.
It is anticipated that the approving opinion will be in substantially the form attached hereto as APPENDIX C. Legal
matters pertinent to the Authority will be passed upon by its counsel, Clark Hill PLC. Certain legal matters will be
passed upon for the University by Pamela W. Connelly, Esquire, Senior Vice President for Legal Affairs and General
Counsel of the University. Certain legal matters will be passed upon for the Underwriters by Dinsmore & Shohl LLP,
Pittsburgh, Pennsylvania, counsel to the Underwriters. It is expected that the Bonds will be available for delivery on
or about December 1, 2022.
Continuing Disclosure
On the date of issuance and delivery of the Bonds, the University will enter into a continuing disclosure certificate
with respect to the Bonds, as required by Rule 15c2-12 promulgated by the Securities and Exchange Commission
(“Rule 15c2-12”). See “CONTINUING DISCLOSURE” and “APPENDIX E – Summary of Continuing Disclosure
Certificate” herein.
Other Information
This Updated Official Statement speaks only as of its date, and the information contained herein is subject to change
without notice. All references in this Updated Official Statement to the Indenture and the Loan Agreement are
qualified in their entirety by reference to such documents, copies of which are available upon request from, and upon
payment of a reasonable copying charge to, the Trustee. All references to the Bonds are qualified in their entirety by
reference to the definitive forms thereof and the information with respect thereto contained in the applicable Indenture.
For definitions of capitalized terms used herein and not otherwise defined, see “APPENDIX D – Summary of the
Indenture and Loan Agreement.”
THE UNIVERSITY
The University, initially founded in 1878 on its present site, is a private, non-profit corporation, incorporated as a
university in 1911 under the laws of the Commonwealth. The University’s campus is located in the City of Pittsburgh,
Allegheny County, Pennsylvania, and is situated adjacent to the downtown area of the City of Pittsburgh. The
University provides undergraduate and graduate education in a number of disciplines.
The University has been determined by the Internal Revenue Service (the “IRS”) to be a charitable organization
described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), and is exempt from
income taxation under Section 501(a) of the Code. See APPENDIX A hereto for information about the University and
APPENDIX B hereto for the audited financial statements of the University.
COVID-19 Outbreak. The University has been adversely affected by the COVID-19 pandemic, the outbreak of a novel
strain of coronavirus that is currently disrupting global, national and local economies and financial markets. For certain
investment risks associated with the COVID-19 pandemic, see the information contained under the caption
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“BONDHOLDERS’ RISKS – Public Health Emergencies and Infectious Disease Outbreak – COVID-19” herein. For
a more detailed discussion of the impact of COVID-19 on the University and measures the University has taken in
response to the outbreak, see the information under the caption “Management Discussion and Analysis” in
APPENDIX A hereto.
THE AUTHORITY
The Authority is a body corporate and politic created pursuant to a resolution of the Board of County Commissioners
of the County under the Act. The Authority was created in 1981. A Certificate of Amendment to the Authority’s
Articles of Incorporation was granted to the Authority by the Secretary of the Commonwealth (the “Secretary”) on
May 22, 1995, extending the Authority’s existence for fifty (50) years from that date. Another Certificate of
Amendment to the Authority’s Articles of Incorporation was granted to the Authority by the Secretary on May 22,
2013, extending the Authority’s existence for fifty (50) years from that date. The Authority’s address is 436 Seventh
Avenue, Suite 500, Pittsburgh, Pennsylvania 15219.
The governing body of the Authority is a board consisting of up to twelve members appointed pursuant to the County
Charter by the County Executive, subject to confirmation by the County Council (the County Executive and County
Council members are elected officials).
The Authority does not and will not in the future monitor the financial condition of the University, the operation of
the Project or otherwise monitor payment of the Bonds or compliance with the documents relating thereto. The
responsibility for the operation of the Project will rest entirely with the University and not with the Authority. The
Authority will rely entirely upon the Trustee and the University to carry out their respective responsibilities under the
Indenture and Loan Agreement and with respect to the Project. The Authority has assets and may attain additional
assets in the future. However, such assets are not pledged to secure payment of the Bonds, and the Authority has no
obligation to make, and no expectation of making, such assets subject to the lien of the Indenture.
The Authority has issued revenue bonds and notes for various projects. Each of the bond and note issues are payable
from receipts and revenues derived by the Authority from the entity on whose behalf the bonds or notes were issued
and is secured separately and distinctly from the issues of every other entity. The Authority expects from time to time
to enter into separate indentures or other agreements for projects that will provide for the issuance of bonds or notes
to be secured by revenues derived from such entities.
THE AUTHORITY HAS NOT PREPARED OR ASSISTED IN THE PREPARATION OF THIS UPDATED
OFFICIAL STATEMENT, EXCEPT THE STATEMENTS UNDER THIS SECTION AND UNDER THE
HEADING “LEGAL MATTERS – ABSENCE OF MATERIAL LITIGATION” AS IT PERTAINS TO THE
AUTHORITY. EXCEPT AS AFORESAID, THE AUTHORITY IS NOT RESPONSIBLE FOR ANY
STATEMENTS MADE HEREIN AND DISCLAIMS RESPONSIBILITY FOR THE DISCLOSURES SET FORTH
HEREIN WHICH ARE MADE IN CONNECTION WITH THE OFFER, SALE AND DISTRIBUTION OF THE
BONDS.
The Authority has the power under the Act to participate in the financing and refinancing of various facilities for use
by private institutions for higher education within the Commonwealth. The Bonds will be limited obligations of the
Authority as described under “SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS.” The Authority
has no taxing power.
THE BONDS
Description of the Bonds
The Bonds will be issued as fully registered bonds without coupons in denominations of $5,000 or any whole multiple
thereof. The Bonds shall bear interest on the unpaid principal at the rates and mature in the amounts and on the dates
set forth on the inside cover page of this Updated Official Statement and are subject to redemption prior to maturity,
as set forth herein. See “THE BONDS – Redemption of the Bonds” herein. While the Bonds are held in book-entryonly form pursuant to the book-entry-only system described below under “DTC AND BOOK-ENTRY”, references
in this Updated Official Statement to the “Owner” or the “Registered Owner” are to Cede & Co., as nominee of DTC.
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Each beneficial owner of a Bond may desire to make arrangements with a DTC Participant to receive notices or
communications with respect to matters described herein. See “DTC AND BOOK-ENTRY” herein.
Interest on the Bonds shall be computed on the basis of twelve 30-day months and a 360-day year and shall be payable
semiannually on March 1 and September 1 of each year (each, an “Interest Payment Date”) commencing on March
1, 2023. When the date of maturity of interest on or principal of any Bond or the date fixed for redemption of any
Bond shall not be a Business Day, then payment of such principal, premium, if any, or interest need not be made on
such date but may be made on the next succeeding Business Day with the same force and effect as if made on the date
of maturity or the date fixed for redemption, and no additional interest shall be payable on such succeeding Business
Day as a result of such deferral of payment. A “Business Day” means a day which is not a Saturday, Sunday or legal
holiday on which banking institutions in the Commonwealth, the State of New York or the state in which the
Designated Office of the Trustee is located are authorized by law to close for a reason not related to financial condition.
Each Bond will be dated as of the date of authentication thereof, and will bear interest from the Interest Payment Date
next preceding the authentication date thereof, unless such Bond is (1) authenticated on or after an Interest Payment
Date on which interest has been paid or provided for, in which event it shall bear interest from such Interest Payment
Date, (2) authenticated on or prior to February 15, 2023, in which event it shall bear interest from the date of issuance
and delivery thereof, (3) authenticated after a Record Date but before the next succeeding Interest Payment Date, in
which event it shall bear interest from such succeeding Interest Payment Date, or (4) interest on such Bond shall be in
default, in which case such Bond shall bear interest from the last date on which interest was last paid or provided for.
So long as DTC or its nominee, Cede & Co., is the registered owner of the Bonds, payments of the principal of,
premium, if any, and interest on the Bonds will be made by the Trustee directly to Cede & Co. Disbursement of such
payments to the DTC Participants (as hereinafter defined) is the responsibility of DTC. Disbursement of such payment
to the owners of the beneficial interest in the Bonds is the responsibility of the DTC Participants and the Indirect
Participants (as hereinafter defined). See “DTC AND BOOK-ENTRY” herein. At all other times, the principal of
the Bonds shall be payable at the Designated Office of the Trustee in Pittsburgh, Pennsylvania, or such other office or
corporate trust office as may be designated by the Trustee as its Designated Office, in such coin or currency of the
United States of America as at the time and place of payment is legal tender for public and private debts. Interest shall
be paid by check drawn upon the Trustee and mailed to the persons in whose names the Bonds are registered at the
close of business on the fifteenth (15th) day (whether or not a Business Day) of the month immediately preceding the
month of the relevant Interest Payment Date (the “Regular Record Date”) at the addresses shown on the registration
records for the Bonds (the “Bond Register”) kept by the Trustee. Notwithstanding the foregoing, if and to the extent
there shall be a default in the payment of interest due on an Interest Payment Date, such defaulted interest shall be
paid on a special payment date established by the Trustee, to the Registered Owners in whose names the Bonds are
registered at the close of business on a special record date (the “Special Record Date” and together with the Regular
Record Date, the “Record Date”) to be fixed by the Trustee, such date to be not more than 30 days (whether or not a
Business Day) nor less than 10 days prior to the date of payment of the defaulted interest.
The principal of, premium, if any, and interest on the Bonds shall be payable in any currency of the United States of
America which, at the respective dates of payment thereof, is legal tender for the payment of public and private debts,
and such principal and premium, if any, shall be payable at the Designated Office of the Trustee upon presentation
and surrender thereof.
Payment of the interest on any Bond shall be made to the person appearing on the Bond Register as the registered
owner thereof as of the Record Date and shall be paid: (i) by check of the Trustee mailed to such Bondholder on the
Interest Payment Date at such Bondholder’s address as it appears on the Bond Register or at such other address as is
furnished to the Trustee in writing by such owner; (ii) in the case of an interest payment to any owner of $1,000,000
or more in aggregate principal amount of Bonds as of the close of business of the Trustee on the Record Date for a
particular Interest Payment Date, by wire transfer to such Bondholder as of the close of business on such Interest
Payment Date upon written notice from such Bondholder containing the wire transfer address (which shall be in the
continental United States) to which such Bondholder wishes to have such wire directed, which written notice is
received not less than one (1) Business Day prior to such Record Date; or (iii) in such other fashion as is agreed upon
between the Bondholder and the Trustee.
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Delivery of Certificates; Registered Owners
Subject to the provisions described under “DTC AND BOOK-ENTRY” below, in the event that (i) after written notice
to the Authority and the Trustee, DTC determines to resign as securities depository for the Bonds and no successor
securities depository has been designated pursuant to the Indenture, or (ii) after written notice to DTC and the Trustee,
the Authority is advised by the University that the University has determined that continuation of the system of bookentry transfers through DTC (or through a successor securities depository) is not in the best interests of the University,
Bond certificates in fully registered form will be printed and delivered as directed by DTC. The ownership of the
Bonds so delivered (and any Bonds thereafter delivered upon a transfer or exchange described below) shall be
registered in the Bond Register kept by the Trustee at its Designated Office, and the Authority, the University and the
Trustee shall be entitled to treat the registered owners of such Bonds, as their names appear in such Bond Register as
of the appropriate dates, as the owners thereof for all purposes described in the Indenture.
Transfer and Exchange
Subject to the provisions described under “DTC AND BOOK-ENTRY” below, a Bond may be transferred or
exchanged only upon presentation thereof to the Trustee. Such Bond must be accompanied by a written instrument
or instruments of transfer or exchange, in form and with guaranty of signatures satisfactory to the Trustee, duly
executed by the Registered Owner thereof or his duly authorized agent or legal representative. Upon surrender of any
Bonds to be transferred or exchanged, the Trustee shall record the transfer or exchange in its Bond Register and shall
authenticate and deliver new Bonds appropriately registered and in appropriate authorized denominations. Neither
the Authority nor the Trustee shall be required to effect or register any transfer or exchange of any Bond during the
period beginning on any Record Date and ending on the corresponding Interest Payment Date, except that Bonds
properly surrendered for partial redemption may be exchanged for new Bonds, in authorized denominations, equal in
the aggregate to the unredeemed portion. No charge will be imposed in connection with any transfer or exchange,
except for taxes or governmental charges related thereto. No service charge shall be made for any transfer of any
Bond, but the Authority or the Trustee may require payment of any sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any transfer or exchange of Bonds.
Redemption of the Bonds
Optional Redemption. The Bonds maturing on or after March 1, 2033 shall be subject to redemption prior to maturity
at the option of the Authority, upon the Written Request of the University, on or after September 1, 2032, in whole or
in part at any time and from time to time at a redemption price of 100% of the principal amount thereof plus interest,
if any, accrued thereon to the date fixed for redemption. Any such redemption shall be made in the order of maturity
selected by the University and within any maturity by lot, as selected by the Trustee.
Mandatory Sinking Fund Redemption. The Bonds are not subject to mandatory sinking fund redemption prior to
maturity.
Extraordinary Redemption. The Bonds are subject to redemption and payment prior to the stated maturity thereof,
at the option of the Authority, upon the Written Request of the University, in whole or in part at any time, at a
redemption price equal to 100% of the principal amount thereof, plus accrued interest thereon to the date fixed for
redemption, without premium, if (such redemption is referred to hereinafter as an “Extraordinary Redemption”) all or
a substantial portion of the Project Facilities (as defined in the Loan Agreement) are damaged or destroyed by fire or
other casualty, or title to, or the temporary use of, all or a substantial portion of the Project Facilities is condemned or
taken for any public or quasi-public use by any authority exercising or threatening the exercise of the power of eminent
domain or title thereto is found to be deficient, to such extent that in the determination of the University, (A) the
Project Facilities cannot be reasonably restored or replaced to the condition thereof preceding such event, or (B) the
University is thereby prevented from carrying on its normal operations of the Project Facilities, or (C) the cost of
restoration or replacement thereof would exceed the Net Proceeds of any casualty insurance, title insurance,
condemnation awards or sale under threat of condemnation with respect thereto.
Selection of Bonds to be Redeemed. No redemption of less than all of the Bonds at the time outstanding shall be
made unless the aggregate principal amount of Bonds to be redeemed is equal to at least $5,000 or any integral multiple
of $5,000. In the event of a redemption of less than all of the Bonds or less than all of the Bonds of any maturity,
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except as otherwise specified in the Indenture, the selection of Bonds to be redeemed shall be made in the order of
maturity designated by the University, and within any maturity by lot, as selected by the Trustee. The method of
selecting Bonds for redemption by lot shall be determined by the Trustee. If the Owner of any Bond shall fail to
present such Bond to the Trustee for payment and exchange as aforesaid, said Bond nevertheless shall become due
and payable on the redemption date to the extent of the principal amount called for redemption.
Notice and Effect of Call for Redemption. Official notice of any redemption shall be given by the Trustee on behalf
of the Authority by mailing a copy of an official redemption notice by first-class mail at least 30 days and not more
than 60 days prior to the redemption date to each Owner of the Bonds to be redeemed at the address shown on the
Bond Register or at such other address as is furnished in writing by such Owner to the Trustee. Any notice of optional
redemption or extraordinary optional redemption of Bonds may specify that the redemption is contingent upon the
deposit of monies with the Trustee in an amount sufficient to pay the redemption price of all the Bonds or portions of
Bonds which are to be redeemed on that date. Official notice of redemption having been given as aforesaid, the Bonds
or portions of Bonds so to be redeemed shall, on the redemption date, become due and payable at the redemption price
therein specified, and from and after such date (unless the Authority shall default in the payment of the redemption
price) such Bonds or portions of Bonds shall cease to bear interest.
A second notice of redemption shall be given within 60 days after the redemption date to the registered owners of
redeemed Bonds, which have not been presented for payment within 30 days after the redemption date. In addition
to the foregoing notices, further notice shall be given by the Trustee on behalf of the Authority at least 30 days before
the redemption date by first-class mail, overnight delivery service or facsimile to all registered securities depositories
then in the business of holding substantial amounts of obligations of types comprising the Bonds and to one or more
national information services that disseminate notices of redemption of obligations such as the Bonds. Failure to give
any notice to any registered owner, or any defect therein, shall not affect the validity of any proceedings for the
redemption of any other Bonds. Any notice mailed shall be conclusively presumed to have been duly given and shall
become effective upon mailing, whether or not any registered owner received the notice.
For so long as DTC is effecting book-entry transfers of the Bonds, the Trustee will provide the redemption notice
described above to DTC. It is expected that DTC will, in turn, notify its participants, and that the participants, in turn,
will notify or cause to be notified the Beneficial Owners of the Bonds to be redeemed. The Authority, the Trustee and
the University will have no responsibility or liability in connection with any failure on the part of DTC or a participant,
or failure on the part of a nominee of a Beneficial Owner of a Bond, to notify the Beneficial Owner of the Bond so
affected, and such failure shall not affect the validity of the redemption of such Bond. See “DTC AND BOOKENTRY” below.
SECURITY FOR AND SOURCES OF PAYMENT OF THE BONDS
General
The Bonds are limited obligations of the Authority payable solely from and secured by a pledge of the revenues
derived by the Authority from the University pursuant to the Loan Agreement and by other funds pledged under the
Indenture as described herein. The Authority has no taxing power.
Pledge of Loan Agreement
The payment of the principal of, premium (if any) and interest on the Bonds is secured under the Indenture by a pledge
to the Trustee, for the benefit of the owners of the Bonds, of the Trust Estate, which includes the following: (i) all
right, title and interest of the Authority in and to the Loan Agreement and the amounts payable thereunder (excluding
Unassigned Rights); (ii) all funds and accounts established by the Trustee under the Indenture other than amounts held
by the Trustee in the Rebate Fund and other moneys expressly excluded pursuant to the Indenture, and (iii) all income
and receipts on the funds (other than the Rebate Fund) held by the Trustee under the Indenture.
The obligation of the University to make the payments required by the Loan Agreement is a general and unconditional
obligation of the University.
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Covenant Regarding Pledge of Tuition and Student Fees
As of the date of the issuance and delivery of the Bonds, neither the Bonds nor any of the Other Outstanding Bonds
are or will be secured by a pledge by the University of its tuition and the proceeds thereof (“Tuition”) or revenues of
the University derived from student fees and the proceeds thereof (“Student Fees”). However, the Loan Agreement
and the loan agreements relating to such Other Outstanding Bonds (the “Prior Loan Agreements”) provide that, in
the event the University pledges its Tuition and Student Fees as security for any bonds or other Long-Term Debt
issued in the future, the University will also provide a parity pledge of its Tuition and Student Fees to the Trustee for
the benefit of the holders of the Bonds and to the respective trustees for the Other Outstanding Bonds for the benefit
of the holders of the Other Outstanding Bonds. See “SUMMARY OF THE LOAN AGREEMENT – Security” in
“APPENDIX D – Summary of the Indenture and Loan Agreement.”
Covenants Regarding Mortgage Liens
Neither the Bonds nor any of the Other Outstanding Bonds are secured by a mortgage on any real property of the
University. However, the University has entered into separate covenants, for the benefit of the holders of the Bonds
and the holders of the Other Outstanding Bonds, that it will not grant a lien on any real properties comprising the
University’s main campus in downtown Pittsburgh, including properties which are contiguous with or in close
proximity to the main campus and which are used for its educational mission, to secure any Long-Term Debt except
for certain Permitted Encumbrances (as defined in APPENDIX D) or unless a lien of equal or superior rank and
priority is granted in favor of the trustee for the applicable series of Other Outstanding Bonds for the benefit of the
holders of such Other Outstanding Bonds. Currently, no Long-Term Debt of the University is secured by any
mortgage.
Rate Covenant; Incurrence of Additional Indebtedness
The Loan Agreement does not contain any covenants relating to the rates, fees and charges set by the University (“rate
covenant”) or incurrence of additional long-term debt (“additional debt test”) by the University. However, the Prior
Loan Agreements do contain a rate covenant and an additional debt test, which rate covenant and additional debt test
are not made for the benefit of the holders of the Bonds and will terminate upon the defeasance or payment in full of
the applicable series of Other Outstanding Bonds. Purchasers of the Bonds should not rely on the existence of the rate
covenant and additional debt test with respect to the Other Outstanding Bonds in determining whether to purchase the
Bonds.
Limited Obligations
THE BONDS ARE LIMITED OBLIGATIONS OF THE AUTHORITY AND ARE PAYABLE SOLELY FROM
AND SECURED SOLELY BY FUNDS HELD BY THE TRUSTEE PURSUANT TO THE INDENTURE AND
MONEYS AND REVENUES PAYABLE UNDER THE LOAN AGREEMENT. THE BONDS AND THE
INTEREST THEREON WILL NEVER CONSTITUTE AN INDEBTEDNESS OF THE AUTHORITY WITHIN
THE MEANING OF ANY CONSTITUTIONAL PROVISION OR STATUTORY LIMITATION AND WILL
NEVER CONSTITUTE OR GIVE RISE TO PECUNIARY LIABILITY OF THE AUTHORITY, NOR WILL ANY
BOND OR INTEREST THEREON BE A CHARGE AGAINST THE GENERAL CREDIT OF THE AUTHORITY
OR THE GENERAL CREDIT AND TAXING POWER OF THE COUNTY, THE COMMONWEALTH OR ANY
POLITICAL SUBDIVISION THEREOF. NEITHER THE FAITH AND CREDIT NOR THE TAXING POWER OF
THE COUNTY, THE COMMONWEALTH OR ANY POLITICAL SUBDIVISION THEREOF IS PLEDGED TO
THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, ON OR INTEREST ON THE BONDS, OR
OTHER COSTS INCIDENTAL THERETO. THE AUTHORITY HAS NO TAXING POWER.
No recourse shall be had for payment of the principal of or interest or premium, if any, on the Bonds, or for any claims
based on the Bonds or the Indenture or any indenture supplemental thereto, against any member, officer or employee,
past, present or future, of the Authority, or of any successor corporation, as such, either directly or through the
Authority or any such successor corporation, whether by virtue of any constitutional provision, statute or rule of law,
or by the enforcement of any assessment or penalty, or otherwise, all such liability of such members, officers or
employees being released as a condition of and as consideration for the execution of the Indenture and the issuance of
the Bonds.
9
PLAN OF FINANCE
Estimated Sources and Uses of Funds
The following table sets forth the estimated sources and uses of Bond proceeds.
Sources of Funds:
Par Amount of the Bonds
Original Issue Premium
Total Sources of Funds
$15,140,000.00
$2,566,796.50
$17,706,796.50
Uses of Funds:
Refunding of 2013A Bonds
Costs of Issuance1
$ 17,530,425.00
$176,371.50
Total Uses of Funds
_______________________
$17,706,796.50
1
Includes fees and expenses of the Authority, legal fees, underwriting compensation, financial advisory fees, rating agency fees,
and other miscellaneous expenses.
Uses of Bond Proceeds
The proceeds of the sale of the Bonds will be loaned to the University for the Project, consisting of financing all or a
portion of the costs of: (a) refunding the 2013A Refunded Bonds and (b) issuance of the Bonds.
DTC AND BOOK-ENTRY
The Depository Trust Company (“DTC”), New York, New York, will act as securities depository for the Bonds. The
Bonds of each series will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s
partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fullyregistered Bond certificate will be issued for each maturity of the Bonds, each in the aggregate principal amount of
such maturity, and will be deposited with DTC.
DTC, the world’s largest depository, is a limited-purpose trust company organized under the New York Banking Law,
a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System,
a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency”
registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides
asset servicing for over 2.2 million issues of U.S. and non-U.S. equity, corporate and municipal debt issues, and money
market instruments from over 100 countries that DTC’s participants (“Direct Participants”) deposit with DTC. DTC
also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in
deposited securities through electronic computerized book-entry transfers and pledges between Direct Participants’
accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both
U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC
is a wholly-owned subsidiary for DTC, National Securities Clearing Corporation and Fixed Income Clearing
Corporation, all of which are registered clearing agencies. DTC is owned by the users of its regulated subsidiaries.
Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers,
banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The
DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information
about DTC can be found at www.dtcc.com and www.dtcc.com.
10
Purchases of Bonds under the DTC system must be made by or through Direct Participants, which will receive a credit
for the Bonds on DTC’s records. The ownership interest of each actual purchaser of each Bond (“Beneficial Owner”)
is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written
confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations
providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect
Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the
Bonds are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Bonds,
except in the event that use of the book-entry system for the Bonds is discontinued.
To facilitate subsequent transfers, all Bonds deposited by Direct Participants with DTC are registered in the name of
DTC’s partnership nominee, Cede & Co. or such other name as may be requested by an authorized representative of
DTC. The deposit of Bonds with DTC and their registration in the name of Cede & Co. or such other nominee do not
effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Bonds;
DTC’s records reflect only the identity of the Direct Participants to whose accounts such Bonds are credited, which
may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping
account of their holdings on behalf of their customers. Conveyance of notices and other communications by DTC to
Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants
to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time. Beneficial Owners of Bonds may wish to take certain steps to
augment transmission to them of notices of significant events with respect to the Bonds, such as redemptions, tenders,
defaults, and proposed amendments to the security documents. For example, Beneficial Owners of Bonds may wish
to ascertain that the nominee holding the Bonds for their benefit has agreed to obtain and transmit notices to Beneficial
Owners; in the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and
request that copies of the notices be provided directly to them.
Redemption notices shall be sent to DTC. If less than all of the Bonds are being redeemed, DTC’s practice is to
determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent or vote with respect to the Bonds unless
authorized by a Direct Participant in accordance with DTC’s Procedures. Under its usual procedures, DTC mails an
Omnibus Proxy to the Authority as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s
consenting or voting rights to those Direct Participants to whose accounts the Bonds are credited on the record date
(identified in a listing attached to the Omnibus Proxy).
Redemption proceeds, distributions, and dividend payments on the Bonds will be made to Cede & Co., or such other
nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’
accounts, upon DTC’s receipt of funds and corresponding detail information from the Authority or the Trustee on the
payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities
held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such
Participant and not of DTC nor its nominee, the Trustee, or the Authority, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend
payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the
responsibility of the Authority or the Trustee, disbursement of such payments to Direct Participants will be the
responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of
Direct and Indirect Participants.
DTC may discontinue providing its services as securities depository with respect to the Bonds at any time by giving
written notice to the Authority or the Trustee. Under such circumstances, in the event that a successor securities
depository is not obtained, Bond certificates are required to be printed and delivered.
The Authority may discontinue use of the system of book-entry-only transfers through DTC (or a successor securities
depository) upon written notice to the Trustee and DTC if the University advises the Authority that the University has
determined that continuation of the system of book-entry transfers through DTC (or through a successor securities
11
depository) is not in the best interests of the University. In that event, Bond certificates will be printed and delivered
to DTC.
The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that
the Authority believes to be reliable, but is not guaranteed as to accuracy or completeness by, and is not to be construed
as a representation by, the Authority, the Underwriters, the Trustee, or the University.
NEITHER THE AUTHORITY, THE TRUSTEE NOR THE UNIVERSITY WILL HAVE ANY RESPONSIBILITY
OR OBLIGATION TO PARTICIPANTS, BENEFICIAL OWNERS OR OTHER NOMINEES OF SUCH
BENEFICIAL OWNERS FOR:
(1) SENDING TRANSACTION STATEMENTS; (2) MAINTAINING,
SUPERVISING OR REVIEWING, OR THE ACCURACY OF, ANY RECORDS MAINTAINED BY DTC OR ANY
PARTICIPANT OR OTHER NOMINEES OF SUCH BENEFICIAL OWNERS; (3) PAYMENT OR THE
TIMELINESS OF PAYMENT BY DTC TO ANY PARTICIPANT, OR BY ANY PARTICIPANT OR OTHER
NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNER, OF ANY AMOUNT DUE IN
RESPECT OF THE PRINCIPAL OF OR REDEMPTION PREMIUM, IF ANY, OR INTEREST ON BOOK-ENTRY
BONDS; (4) DELIVERY OR TIMELY DELIVERY BY DTC TO ANY PARTICIPANT, OR BY ANY
PARTICIPANT OR OTHER NOMINEES OF BENEFICIAL OWNERS TO ANY BENEFICIAL OWNERS, OR
ANY NOTICE (INCLUDING NOTICE OF REDEMPTION) OR OTHER COMMUNICATION WHICH IS
REQUIRED OR PERMITTED UNDER THE TERMS OF THE INDENTURE TO BE GIVEN HOLDERS OR
OWNERS OF BOOK-ENTRY BONDS; (5) THE SELECTION OF THE BENEFICIAL OWNERS TO RECEIVE
PAYMENT IN THE EVENT OF ANY PARTIAL REDEMPTION OF BOOK-ENTRY BONDS; OR (6) ANY
ACTION TAKEN BY DTC OR ITS NOMINEE AS THE REGISTERED OWNER OF BOOK-ENTRY BONDS.
BONDHOLDERS’ RISKS
The payment of the principal of, premium (if any) on and interest on the Bonds to the registered owners thereof
depends entirely upon the ability of the University to pay debt service thereon. Various factors could adversely affect
the University’s ability to pay the obligations under the Loan Agreement. The future financial condition of the
University could be adversely affected by, among other things, economic conditions in the areas from which the
University traditionally draws students, legislation, regulatory actions, increased competition from other educational
institutions, changes in the demand for higher educational services, demographic changes and litigation. Some of
such risk factors are described below.
The following is intended only as a summary of certain risk factors attendant to an investment in the Bonds and is not
intended to be exhaustive. In order to identify risk factors and make informed investment decisions, potential investors
should be thoroughly familiar with the entire Updated Official Statement (including each of the Appendices hereto)
in order to make a judgment as to whether the Bonds are an appropriate investment. Purchasers of the Bonds,
particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in
the United States of America), property or casualty insurance companies, banks or other financial institutions, or
certain recipients of Social Security benefits, are advised to consult their tax advisors as to the tax consequences of
purchasing or holding the Bonds. See “TAX MATTERS” herein.
General. The Bonds are limited obligations of the Authority payable solely from the Trust Estate which includes
payments made by the University under the Loan Agreement and certain funds held by the Trustee pursuant to the
Indenture. No representation or assurance can be given that the University will generate sufficient revenues to meet
its payment obligations under the Loan Agreement. The ability to generate such revenues could be affected adversely
by future legislation, regulatory actions, economic conditions, increased competition, changes in the demand for
services or other factors. Neither the Underwriters nor the Authority has made any independent investigation of the
extent to which any such factors may have an adverse effect on the revenues of the University.
Other Legislative and Regulatory Actions. The University and its operations are subject to regulation, certification
and accreditation by various federal, state and local government agencies and by certain nongovernmental agencies.
No assurance can be given as to the effect on future operations of existing laws, regulations and standards for
certification or accreditation or of any future changes in such laws, regulations and standards.
12
Competition. The University could face additional competition in the future from other educational institutions that
offer comparable services and programs to the population which the University presently serves. Such competition
could include the establishment of new programs and the construction, renovation or expansion of competing
educational institutions. No assurance can be given as to the effect on future operations of such competing services
and programs.
Tax-Exempt/Non-Profit Status. In recent years, the activities of tax-exempt organizations have been subjected to
increasing scrutiny by federal, state, and local legislative and administrative agencies (including the United States
Congress, the IRS, and local taxing authorities). Various proposals either have been considered previously or are
presently being considered at the federal, state, and local level which could restrict the definition of tax-exempt status,
impose new restrictions on the activities of tax-exempt organizations and/or tax or otherwise burden the activities of
such organizations (including proposals to broaden or strengthen federal tax provisions respecting unrelated business
income of such organizations). There can be no assurance that future changes in the laws, rules, regulations,
interpretations and policies relating to the definition, activities and/or taxation of tax-exempt organizations will not
have material adverse effects on the future operations of the University.
Compliance with current and future regulations and rulings of the IRS could adversely affect the ability of the
University to charge and collect revenues, finance or incur indebtedness on a tax-exempt basis or otherwise generate
revenues necessary to provide for payment of the Bonds. Although the University has covenanted to maintain its taxexempt status, loss of tax-exempt status by the University would likely have a significant adverse effect on the
University and could result in the inclusion of interest on the Bonds in gross income for federal income tax purposes
retroactive to their date of issue or acceleration of the maturity of the Bonds.
Property Tax Assessments. In recent years, a number of local taxing authorities in Pennsylvania, including the
County, local townships and school districts, have sought to subject the facilities of nonprofit universities and colleges
to local real estate taxes, primarily by challenging the status of such universities and colleges as “purely public
charities” as described in the Pennsylvania Constitution, notwithstanding the fact that facilities owned by Pennsylvania
nonprofit universities and colleges historically have been viewed as exempt from such taxes. In response to the
uncertainty resulting from divergent court decisions, in 1997 the Pennsylvania legislature enacted The Institutions of
Purely Public Charity Act which, among other things, sets forth specific criteria to be met by an entity in order for
such entity to be deemed an “institution of purely public charity”. Such criteria are highly fact-specific and are to be
used by the courts as guidance; therefore, there are no assurances that the University facilities will meet such criteria
now or in the future. Notwithstanding passage of the Institutions of Purely Public Charity Act, the question whether
an institution qualifies as a “purely public charity” remains a constitutional issue to be determined by the courts and
it is not clear to what extent, if any, the courts will rely upon the Institutions of Purely Public Charity Act in making
such determinations. The University has no reason to believe that the University facilities that are currently taxexempt will not retain their real estate tax exemption, but no assurance can be given that such real estate tax exemption
will not be challenged in the future.
Covenant to Maintain Tax-Exempt Status of the Bonds. The tax-exempt status of interest on the Bonds is based on
the continued compliance by the Authority and the University with certain covenants contained in the Indenture and
Loan Agreement. These covenants relate generally to restrictions on the use of the Project, arbitrage limitations,
rebate of certain excess investment earnings to the federal government and restrictions on the amount of issuance costs
financed with the proceeds of the Bonds. Failure to comply with such covenants could cause interest on the Bonds to
become subject to federal income taxation retroactively to the date of issuance of the Bonds.
Certain Matters Relating to Enforceability of Obligations. The remedies available to Bondholders upon an Event of
Default under the Indenture or the Loan Agreement are in many respects dependent upon judicial action which is
subject to discretion or delay. Under existing law and judicial decisions, including specifically the United States
Bankruptcy Code (the “Bankruptcy Code”), the remedies specified in the Indenture and Loan Agreement may not be
readily available or may be limited. A court may decide not to order specific performance.
The various legal opinions to be delivered concurrently with the original delivery of the Bonds will be qualified as to
enforceability of the various legal instruments by, among other things, limitations imposed by bankruptcy,
reorganization, insolvency or other similar laws or legal or equitable principles affecting creditors’ rights.
13
There exists statutory authority in Pennsylvania for a court to dissolve a nonprofit corporation or undertake supervision
of its affairs on various grounds, including a finding that such corporation is insolvent. Moreover, pursuant to the
common law and statutory power to enforce charitable trusts and to see that charitable funds are applied to their
intended uses, the Attorney General of the Commonwealth may commence legal proceedings to dissolve a nonprofit
corporation acting contrary to its charitable purposes or to restrain actions inconsistent with the charitable use of such
funds or which render such nonprofit corporation unable to discharge its charitable functions. In certain states, such
actions may arise on a court’s own motion or pursuant to a petition of the attorney general or such other persons who
have interests different than those of the general public. The obligations of the University may be limited by such
charitable trust laws.
Bankruptcy. The rights and remedies of the owners of the Bonds are subject to various provisions of the Bankruptcy
Code. If the University were to file a petition for relief (or if a petition were to be filed against the University) under
the Bankruptcy Code, the filing would operate as an automatic stay of the commencement or continuation of any
judicial or other proceeding against the University and its property.
In a bankruptcy proceeding, the University could file a plan for the adjustment of its debts which modifies the rights
of creditors generally or the rights of any class of creditors, secured or unsecured. The plan, when confirmed by the
court, binds all creditors who had notice or knowledge of the plan and discharges all claims against the debtor provided
for in the plan. No plan may be confirmed unless, among other conditions, the plan is in the best interest of creditors,
is feasible, and has been accepted by each class of claims impaired thereunder.
Each class of claims has accepted the plan if at least two-thirds in dollar amount and more than one-half in number of
the allowed claims of the class that are voted with respect to the plan are cast in its favor. Even if the plan is not so
accepted, it may be confirmed if the court finds that the plan is fair and equitable with respect to each class of nonaccepting creditors impaired thereunder and does not discriminate unfairly.
Cybersecurity Risk. In the course of its operations, the University collects and stores personally identifiable
information, including, but not limited to, social security numbers, educational records and financial information. The
University also develops, maintains and/or stores, as applicable, intellectual property such as research data.
Like all institutions of higher education, the University could be subject to cyber intrusion through hacking, malware
and/or email scams. Cyber intrusion could lead to (i) data breaches requiring breach notification, (ii) denial of service
(e.g., network, system, application or data), (iii) loss of intellectual property and data, (iv) harm to the University’s
brand or reputation, (v) life/health safety impacts and/or (vi) financial loss. The University takes steps to prevent,
detect and respond to cyber intrusion. Further, the University maintains cyber insurance coverage to protect against
data breaches and other cyber events. However, because the techniques used to obtain unauthorized access, disable
or degrade service, or sabotage systems change frequently, or may be disguised or difficult to detect, or may be
designed to remain dormant until a triggering event occurs, the University may be unable to anticipate these techniques
or implement adequate preventative measures. In addition, no assurance can be given that the insurance coverages
maintained by the University would be sufficient to cover all losses and liability resulting from data breaches or other
cyber events.
Changes in Tax Laws. Current and future presidential proposals or legislative proposals in the Congress and in the
states, if enacted into law, clarifications of the Internal Revenue Code of 1986, as amended (the “Code”) or court
decisions may cause interest on the Bonds to be subject, directly or indirectly, to federal income taxation or to be
subject to or not exempted from state income taxation, or otherwise prevent the holders of the Bonds from realizing
the full current benefit of the tax status of such interest. For example, federal tax legislation was enacted on December
22, 2017 which reduced corporate tax rates, modified individual tax rates, eliminated many deductions, repealed the
corporate alternative minimum tax (for taxable years beginning after December 31, 2017) and eliminated tax-exempt
advance refunding bonds, among other things. Any such limitation on the use of tax-exempt bonds to finance
educational facilities or on the use of tax-exempt bonds generally could reduce the ability of the University to finance
its future capital needs or to achieve interest rate savings on new or existing debt in the future. The introduction or
enactment of any such presidential or legislative proposals, clarifications of the Code or court decisions may also
affect, perhaps significantly, the market price for, or marketability of, the Bonds. Prospective purchasers of the Bonds
should consult their own tax advisors regarding any pending or proposed federal or state tax legislation, regulations
14
or litigation, and regarding the impact of future legislation, regulations or litigation, as to which Bond Counsel will
express no opinion. See “TAX MATTERS.”
Officials of the IRS have maintained in recent years that more resources will be invested in audits of tax-exempt bonds
in the charitable organization sector with specific review of private use. In addition, the IRS has sent several hundred
post-issuance compliance questionnaires to nonprofit corporations that have borrowed on a tax-exempt basis regarding
their post-issuance compliance with various requirements for maintaining the federal tax exemption of interest on their
bonds. The questionnaire includes questions relating to the borrower’s (i) record retention, which the IRS has
particularly emphasized, (ii) qualified use of bond-financed property, (iii) arbitrage yield restriction and rebate
requirements, (iv) debt management policies and (v) voluntary compliance and education.
Public Health Emergencies and Infectious Disease Outbreak – COVID-19. The University, like any other publicly
accessible institution accommodating concentrations of people at its facilities, is potentially susceptible to health
emergencies, and related crises management and containment issues, arising from unforeseen large-scale outbreaks of
transmittable diseases and other contagions affecting students, faculty, staff, and campus visitors. A recent example
of this is COVID-19, a respiratory disease caused by a new strain of coronavirus whose transmission means, contagion
factor, treatment regime and mortality rate are not yet fully understood. The outbreak of COVID-19 has been
characterized as a pandemic (the “Pandemic”) by the World Health Organization and has affected all parts of the
world, including the United States and the Commonwealth.
Because of the Pandemic, the University moved instruction to a remote delivery model in March 2020 which resulted
in reduced revenue for the University, including from housing, food, events and parking services. During the Fall
2021 semester, the University delivered its courses primarily in person, with some flexible delivery methods.
Consistent with health authority recommendations and governmental directives and guidance, in the fall of 2021, the
University implemented a vaccine requirement under which employees and students either must be fully vaccinated
or secure an approved exemption.
With the passage of the Coronavirus Aid Relief and Economic Security Act (the “CARES Act”) and congressional
appropriations toward the Higher Education Emergency Relief Fund (“HEERF”), the University received grant funds
of $5,373,970 for the year ended June 30, 2020. Conditions of the award require 50% to be used for emergency
financial aid grants to students and 50% to be used to support any institutional costs associated with significant changes
to the delivery of instruction due to the Pandemic. During the year ended June 30, 2020, the University awarded
approximately $2,686,985 to students as emergency financial aid grants and was reimbursed $2,686,985 for housing,
meal plan …